East Coast Rail Line to proceed only if cost is cut drastically

Malaysia will not proceed with the East Coast Rail Line (ECRL) project with China unless its RM81 billion (S$29 billion) price tag can be substantially reduced. “We expect that...

Malaysia will not proceed with the East Coast Rail Line (ECRL) project with China unless its RM81 billion (S$29 billion) price tag can be substantially reduced.

“We expect that the ECRL project will become financially and economically feasible only if there is a drastic price reduction of the project by CCCC,” said Finance Minister Lim Guan Eng in a statement yesterday, referring to the project’s main contractor, China Communication Construction Company (CCCC).

He said the ministry will be holding discussions with the contracting parties on reducing the costs.

 

According to Mr Lim, while nearly RM20 billion has been spent to build the railway spanning Peninsular Malaysia’s east and west coasts, about half of the amount can be recouped if the project is cancelled by redeeming an advance payment bond.

“In the event of a worst-case scenario, the federal government can recover RM10.02 billion of the RM19.68 billion paid,” he said.

He had earlier said it would not make sense to cancel the project as the government had already spent RM20 billion on it.

The ECRL, a project inked in 2016 by the former Najib Razak administration, is meant to link the country’s main Port Klang in Selangor to the border town of Pengkalan Kubor in Kelantan.

The railway, originally estimated to cost RM55 billion, is one of several mega-projects being reviewed by the new Pakatan Harapan government as it grapples with more than RM1 trillion in national debt.

Mr Lim said yesterday the total cost of the ECRL is actually RM81 billion, after taking into account land acquisition, interest, fees and other operational costs. At RM66.78 billion, construction costs form the bulk of the total sum.

The railway is also not expected to cover its operating costs, though the extent of operating deficit cannot be determined for now, he added.

He also noted that the Selangor government had not been consulted on the project, which could jeopardise the state government’s application to have the Klang Gates Quartz Ridge, the longest of its kind in the world, designated as a Unesco World Heritage Site.

 

WORST-CASE SCENARIO

In the event of a worst-case scenario, the federal government can recover RM10.02 billion of the RM19.68 billion paid.

MALAYSIAN FINANCE MINISTER LIM GUAN ENG, on how much can be recouped if the East Coast Rail Line project is cancelled.

Source: https://www.straitstimes.com/asia/se-asia/east-coast-rail-line-to-proceed-only-if-cost-is-cut-drastically
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